COT positioning has changed very little in the past few weeks, even as the US dollar has stregthened signficantly and then reversed violently. Still, some useful information can be gathered from the data.
US Dollar Index: Speculators had been extremely long recently and that extreme is being corrected but price has not corrected. This is a likely spot for at least a USD decline to begin since there is resistance from the 2006 high.
Implications: Topping?
EUR: The composite COT was recently at its lowest ever in mid September. The EURUSD then fell like a rock but COT positioning has remained steady. Still, Composite COT is near historically low levels which is suggestive of a bottom.
Implications: Bottoming?
GBP: The interpretation of the British Pound COT numbers are the exact same as the interpretation of the COT numbers for the Euro.
CHF: The 52 week index turned from 0, suggesting that a CHF bottom (USDCHF top) is close.
JPY: Bottoms in the USDJPY occur when speculators are extremely long the JPY (short USDJPY), which is not yet the case. Continue to favor Yen strength.
Implications: Bullish
CAD: CAD positoning is neutral. The Composite COT is near 0. There is nothing worth noting.
Implications: Neutral
AUD: Composite COT is at a level that previously indicated an important low (March 2006). This combined with the turn up from 0 in the 52 week index favors strength.
NZD: The NZD index has turned from 0. Speculators were recently net short the largest amount of NZD on record (the record only goes back a few years though). These are bullish signals.
Jamie Saettele writes Forex Technicals: The Day Ahead, Monday-Thursday (published at 6 pm EST), Daily Technicals every weekday morning (9 am EST), COT analysis (published Monday mornings), and analysis of currency crosses throughout the week. He is also the author of Sentiment in the Forex Market.
Contact at jsaettele@dailyfx.com